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Abstract:
During the 1980s, a number of unusual financial crises occurred. In Chile, for example, the financial sector collapsed, leaving the government with responsibility for extensive foreign debts. In the United States, large numbers of government-insured savings and loans became insolvent - and the government picked up the tab. In Dallas, Texas, real estate prices and construction continued to boom even after vacancies had skyrocketed, and the suffered a dramatic collapse. Also in the United States, the junk bond market, which fueled the takeover wave, had a similar boom and bust.

In this paper, we use simple theory and direct evidence to highlight a common thread that runs through these four episodes. The theory suggests that this common thread may be relevant to other cases in which countries took on excessive foreign debt, governments had to bail out insolvent financial institutions, real estate prices increased dramatically and then fell, or new financial markets experienced a boom and bust. We describe the evidence, however, only for the cases of financial crisis in Chile, the thrift crisis in the United States, Dallas real estate and thrifts, and junk bonds.

Our theoretical analysis shows that an economic underground can come to life if firms have an incentive to go broke for profit at society's expense (to loot) instead of to go for broke (to gamble on success). Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations.

Abstract:
This paper outlines a theoretical framework for thinking about the role of human capital in a model of endogenous growth. The framework pay particular attention to two questions: What are the theoretical differences between intangibles like education and experience on the one hand, and knowledge or science on the other? and How do knowledge and science actually affect production? One implication derived from this framework is that the initial level of a variable like literacy may be important for understanding subsequent growth. This emphasis on the level of an input contrasts with the usual emphasis from growth accounting on rates of change of inputs. The principal empirical finding is that literacy has no additional explanatory power in a cross-country regression of growth rates on investment and other variables, but consistent with the model, the initial level of literacy does help predict the subsequent rate of investment, and indirectly, the rate of growth.

Abstract:
This paper suggests that innovation policy in the United States has erred by subsidizing the private sector demand for scientists and engineers without asking whether the educational system provides that supply response necessary for these subsidies to work. It suggests that the existing institutional arrangements in higher education limit this supply response. To illustrate the path not taken, the paper considers specific programs that could increase the numbers of scientists and engineers available to the private sector.

Abstract:
Technology has been evolving and improving over the years, thus impacting growth and competition among businesses and industries. Considering these technological advancements, three arguments are presented: technological change acts as the base for economic growth; technological change occurs due to intentional actions by individuals who consider market incentives; and instructions for utilizing raw materials are much different than those related to other economic goods. These arguments do not support typical growth models, which are defined by the relationship between price-taking behaviors and equilibrium. Several issues, including rivalry, excludability, and nonconvexities, are identified as further proof that economic aggregate growth models are not as well supported as previous research would indicate. Based on this information, the proposed balanced equilibrium model considers such factors as capital (units of consumption), labor (number of people), human capital (cumulative effect of education and training), and an index of the level of technology (number of designs). The model is operationalized, and strengths and weaknesses of the proposed model are examined, including the means of accounting for such issues as imperfect competition within the market. Implications of the model as related to such factors as economic growth, international trade, and R&D are also discussed. As suggested by the model, the rate of technological change is influenced by the rate of interest, and a positive relationship appears to exist between human capital and an economy's growth rates, implying that policies that provide incentives for research and/or subsidize education and training should strengthen economic growth. (AKP)

Industrial research, R&D, Technological change, Capital formation, Labor force, Human capital, Incentives, Market competition, Economic growth, International trade, Higher education

Abstract:
Growth in this model is driven by technological change that arises from intentional investment decisions made by profit maximizing agents. The distinguishing feature of the technology as an input is that it is neither a conventional good nor a public good; it is a nonrival, partially excludable good. Because of the nonconvexity introduced by a nonrival good, price-taking competition cannot be supported, and instead, the equilibrium is one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large populatin is not sufficient to generate growth.

Abstract:
In a world with two similar, developed economies, economic integration can cause a permanent increase in the worldwide rate of growth. Starting from a position of isolation, closer integration can be achieved by increasing trade in goods or by increasing flows of ideas. We consider two models with different specifications of the research and development sector that is the source of growth. Either form of integration can increase the long-run rate of growth if it encourages the worldwide exploitation of increasing returns to scale in the research and development sector.

Abstract:
From the beginning, growth theory has been faced with technically challenging questions about increasing returns and the way to capture ideas in a model of market exchange. Initially, reliance on perfect competition forced growth theory to narrow its scope. Recently, new tools for studying dynamic equilibria with nonconvexities, externalities, and imperfect competition have allowed growth theory to address broader questions like: Why have growth rates tended to increase over time? Why is it that flows of capital are not sufficient to equalize wages in different countries? How is it that trade policy, or aggregate research and development expenditure, or the extent of patent protection influences the rate of growth?

Abstract:
The typical economic model implicitly assumes that the set of goods in an economy never changes. As a result, the predicted efficiency loss from a tariff is small, on the order of the square of the tariff rate. If we loosen this assumption and assume that international trade can bring new goods into an economy, the fraction of national income lost when a tariff is imposed can be much larger, as much as two times the tariff rate. Much of this paper is devoted to explaining why this seemingly small change in the assumptions of a model can have such important positive and normative implications. The paper also asks why the implications of new goods have not been more extensively explored, especially given that the basic economic issues were identified more than 150 years ago. The mathematical difficulty of modeling new goods has no doubt been part of the problem. As equally, if not more important stumbling block has been the deep philosophical resistance that humans feel toward the unavoidable local consequence of assuming that genuinely new things can happen at every juncture: the world as we know it is the result of a long string of chance outcomes.

Abstract:
When they are used together, economic history and new growth theory give a more complete picture of technological change than either can give on its own. An empirical strategy for studying growth that does not use historical evidence is likely to degenerate into sterile model testing exercises. Historical analysis that uses the wrong kind of theory or no theory may not emphasize the lessons about technology that generalize. The complementarity between these fields is illustrated by an analysis of early industrialization. The key theoretical observation is that larger markets and larger stocks of resources create substantially bigger incentives for discovering new ways to use the resources. This simple insight helps explain why the techniques of mass production emerged in the United States during the first half of the 19th century. It also helps explain how a narrow advantage in the techniques of mass production for a small set of goods grew into broad position of industrial supremacy by the middle of the 20th century.

Abstract:
No abstract is available for this paper.

Abstract:
Wages for more- and less-educated workers have followed strikingly different paths in the U.S. and Canada. During the 1980's and 1990's, the ratio of earnings of university graduates to high school graduates increased sharply in the U.S. but fell slightly in Canada. Katz and Murphy (1992) found that for the U.S. a simple supply-demand model fit the pattern of variation in the premium over time. We find that the same model and parameter estimates explain the variation between the U.S. and Canada. In both instances, the relative demand for more-educated labor shifts out at the same, consistent rate. Both over time and between countries, the variation in rate of growth of relative wages can be explained by variation in the relative supply of more-educated workers. Many economists suspect that technological change is causing the steady increases in the relative demand for more-educated labor. If so, these data provide independent evidence on the spatial and temporal variation in the pattern of technological change. Whatever is causing this increased demand for skill, the evidence from Canada suggest that increases in educational attainment and skills can reduce the rate at which relative wages diverge.

Abstract:
This paper studies the interactions between health insurance and the incentives for innovation. Although we focus on pharmaceutical innovation, our discussion applies to other industries producing novel technologies for sale in markets with subsidized demand. Standard results in the growth and productivity literatures suggest that firms in many industries may possess inadequate incentives to innovate. Standard results in the health literature suggest that health insurance leads to the overutilization of health care. Our study of innovation in the pharmaceutical industry emphasizes the interaction of these incentives. Because of the large subsidies to demand from health insurance, limits on the lifetime of patents and possibly limits on monopoly pricing may be necessary to ensure that pharmaceutical companies do not possess excess incentives for innovation.

Abstract:
No abstract is available for this paper.

Abstract:
No abstract is available for this paper.

Abstract:
We construct a rational expectations model in which aggregate growth alternates between a low growth and a high growth state. When all agents expect growth to be slow, the returns on investment are low, and little investment takes place. This slows growth and confirms the prediction that the returns on investment will be low. But if agents expect fast growth, investment is high, returns are high, and growth is rapid. This expectational indeterminacy is induced by complementarity between different types of capital goods. In a growth cycle there are stochastic shifts between high and low growth states and agents take full account of these transitions. The rules that agents need to form rational expectations in this equilibrium are simple. The equilibrium with growth cycles is stable under the dynamics implied by a correspondingly simple learning rule

Abstract:
No abstract is available for this paper.

Abstract:
In 1961, Nicholas Kaldor used his list of six "stylized" facts both to summarize the patterns that economists had discovered in national income accounts and to shape the growth models that they were developing to explain them. Redoing this exercise today, nearly fifty years later, shows how much progress we have made. In contrast to Kaldor's facts, which revolved around a single state variable, physical capital, our six updated facts force consideration of four far more interesting variables: ideas, institutions, population, and human capital. Dynamic models have uncovered subtle interactions between these variables and generated important insights about such big questions as: Why has growth accelerated? Why are there gains from trade?

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Abstract:
When economists in the 1950s and 1960s used growth models to understand the experience of developing countries, they allowed for the possibility of technology differences between developing countries and the United States. But because they did not have a good theory for talking about the forces that determined the level of the technology-in the United States any more than in developing countries-technology factors tended to be pushed into the background in policy discussions.